Monthly Finance Playbook for Startups PDF Free Download
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Table of Contents
Building Your Financial Model . . . . .
Using the Templates . . . . . . . . . . .
The Monthly Finance Playbook . . . .
Step #1: Set Your Forecast . . . . . .
Step #2: Execute Your Plan . . . . .
Step #3: Track Your Metrics . . . . .
Step #4: Update Your Model . . . .
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4
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Introduction . . . . . . . . . . . . . . . . . . . . . 3
Step #5: Compare & Contrast . . . 12
Step #6: Tweak & Repeat . . . . . . . 13
Getting Help with Your Model . . . . . 14
As a founder, managing your startup’s finances is the most important responsibility
you have, hands down. Research shows that running out of cash is the most common
reason startups fail. And as someone who spends a lot of time talking to founders, I
can tell you firsthand that it's also the top reason founders lose sleep at night.
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Introduction
Most founders are not financial experts,
and many feel overwhelmed by the weight
of managing the money of a growing
startup as it starts to scale. So don't worry
if that's you; you're definitely not alone!
A financial model is the perfect tool to help
you wrangle all those financial loose ends.
It helps you identify problems, measure
performance, and even gives you a glimpse
of your financial future.
This guide will put you on the fast track to
taking control of your finances and
sleeping well at night!
I'll walk you through the process of creating a solid and reliable financial model that
will impress your potential investors and provide clear answers to their questions
about how your business will use its resources to acquire customers, hire a winning
team, and generate revenue in the future.
I'll also share a simple monthly playbook you can use to optimize your business
operations from a financial perspective and ensure that you will never run out of
cash unexpectedly.
This is the exact process that my co-founder and I run every month to ensure that
Forecastr is on track to hit our projections for customer acquisition and revenue
expansion, and it's the same process we use for our paying customers as well.
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SaaS (Monthly subscription)
SaaS (Annual subscription)
Ecommerce
Marketplace
These four templates should accommodate
most early-stage startups:
If none of these templates matches your
business model, you can find several
additional templates here.
Using the Templates
The free templates included below will help you build a clean and polished financial
model. My goal is to help you create a model you can use to run your business better
and even to help in fundraising. These templates will also make it as easy as possible
for you to transition to a full-service financial modeling solution in the future.
When you have selected the template that best matches your business model, your
first step will be to get oriented within the spreadsheet.
Each template is broken down into three separate tabs: Overview, Assumptions, and
Financials.
Building Your Financial Model
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The Assumptions Tab
You can think of the Assumptions tab as everything that is powering your financial
model. It contains all of the data that is used to calculate the outputs in the three
financial statements. The sections you’ll need to enter data for are Customer
Acquisition, Revenue, People, Expenses, and Balance Sheet. Use the “+” symbol in the
far left column to expand the section you are currently working in.
Throughout our templates, some cells are highlighted green. These are Input Cells, and
they are meant to be updated with your financial data. Other cells are calculations and
will update automatically based on the data you enter into the Input Cells.
The Overview serves as a cover sheet to introduce the model to stakeholders,
investors, and anyone else who may be unfamiliar with the workings of your business.
You should insert your logo and website on this page and you can change the colors,
fonts, and styling of the page to match your company’s branding.
The linked table of contents in the left-hand column allows easy navigation
throughout the spreadsheet, and we strongly recommend you leave the “Table of
Contents” section intact if you will be sharing the model with any third parties.
However, you can replace the links in the “Other Resources” section with links that
are appropriate for your audience.
The Overview Tab
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Customer Acquisition
The Assumptions Tab (cont.)
We have populated the template with the most common customer acquisition
channels we come across in our work with our clients. You should identify the
channels that are relevant to your business and enter the appropriate data to
populate each section. For any channels that do not apply to your business, you
can either enter zeroes for all inputs, or you can delete the channel entirely.
Revenue
The revenue section will be automatically populated with the customer acquisition
data you entered above. Enter information for the missing inputs (for example,
pricing, churn rate, and % of new customers) to forecast the revenue that will be
generated by your projected customer growth.
People
Use the people section to document your current and future team. First, enter the
appropriate inputs for your existing team members. Next, add the inputs for hires
you plan to make within the forecasted period. Delete any unnecessary rows, or
insert additional rows as needed to accommodate the size of your planned team. If
you add or remove rows in the People section, be sure to update the Salaries &
Benefits row in the Income Statement section of the Financials tab so that the
range being calculated reflects the actual rows in your updated People section.
Expenses
In this section, you will track everything else that your business will be spending
money on. Add and remove lines as necessary to account for your actual planned
expenses.
Balance Sheet
The balance sheet section is used to track everything that you own, and
everything that you owe. Enter your starting cash balance, your average days
receivable, and any fixed assets your company owns or will purchase during the
projected period. Depreciation will be calculated automatically for any assets you
enter here. Under liabilities, enter your average days payable, your paid-in capital
and current dilution, and the dates and amounts for any planned funding rounds.
The Financials tab shows projections for your three financial statements: your income
statement, balance sheet, and cash flow statement. All of the data on the Financials
tab is calculated based on the inputs you entered on the Assumptions tab.
You should not manually change any of the values in this tab. Instead, update the
inputs on your Assumptions tab to create the desired outputs.
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The Financials Tab
Notice that the contents of each
financial statement are grouped
together. You can click the + / -
controls in the far left column of the
spreadsheet to expand and collapse
each section. This will allow you to
focus only on the information you are
currently looking for and temporarily
hide everything else.
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To get started, you’ll use the financial model you built earlier to set a forecast for your
company that’s attractive but also reasonable. This forecast represents a series of
goals, or targets, that cover every aspect of your business, including customer
acquisition, revenue, hiring, and expenses.
After you’ve built your financial model,
you can start getting value from it
immediately. Run this simple but
powerful playbook every month to
make sure you hit your growth targets
and avoid the risk of unexpectedly
running out of cash.
With a little practice, you'll be able to
complete this playbook in just an hour
or two every month, so stick with it.
The Monthly Finance Playbook
Step #1: Set Your Forecast
As you set your forecast, consider
important milestones for each financial
metric. From a growth and revenue
perspective, where do you need to be in
six, twelve, or eighteen months? Adjust
your inputs to chart a course that shows
you reaching each of these milestones in a
way that feels attractive but reasonable to
you, your co-founders and other key
stakeholders. With each adjustment you
make, pay close attention to the impact on
your burn rate and runway.
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Now that you’ve set your initial forecast, put
the model on a shelf, and don’t think about
it! Focus on running your business, building
your product, selling new customers, and
talking to investors. You should try to hit the
goals you set for the month, but from a daily
perspective, you should just focus on doing
the best you can at what you do.
If something unusual happens during the
month, you can always consult your model
for guidance. If you diverge significantly
from your plan - maybe you met a person
you just had to hire, or you got a special
offer on a new tool you’ve been wanting -
it’s good to update your model with mid-
month adjustments. Otherwise, just leave
the model on the shelf and focus on running
your business.
If you have historical data available, such as accounting data or metrics and KPIs you
have been tracking, you should use that information to inform your forecast and
ensure that your projections are grounded in reality.
If you don’t have a lot of historical data (and even if you do) it’s fine for this process to
be led by your “gut.” The best way to identify targets for your business is often by
feel as much as by calculation. You want your forecast to be attractive but
reasonable, and you’ll feel it when the numbers are right.
At this stage, it’s fine if the numbers aren’t perfectly correct. And it’s fine if you feel
unsure about your projections. That’s what the rest of the playbook is for! When you
run this playbook consistently every month, you’ll constantly tune the forecast to
bring it in line with the realities of your business. It will become more accurate, and
thus more useful, with each passing month.
Step #2: Execute Your Plan
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When you’re running a startup, it’s important to have a metric-tracking system in
place so that you can consistently report on the KPIs and metrics that impact your
business, and show investors how you have performed over time.
Step #3: Track Your Metrics
Accounting: Quickbooks, Xero, etc.
Sales & Marketing: CRM, Ads, etc.
Revenue & Billing: Stripe, Shopify,
ChartMogul, etc.
Payroll: Gusto, Rippling, etc.
Accounting: Revenue, COGS,
expenses, cash, etc.
Sales & Marketing: Leads, new
customers, conversion rates, etc.
Revenue & Billing: Total customers,
price, churn rates, etc.
Payroll: Headcount, salaries, etc.
For most startups, this metric-tracking
“system” is actually a myriad of different
tools, and might include any or all of the
following:
You can use these tools to track various
metrics that impact your financial model,
including:
You need to track your chosen metrics accurately and consistently so that you can
compare your forecast against your actual results. As you’ll see in the next section,
this is a critical part of tuning your financial model over time to accurately represent
your reality.
But don't stress out if parts of your metric-tracking system need a little fine-tuning.
You can always come back and update past metrics after you standardize your system.
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You can start right away by updating your model with all of the metrics that are
immediately available, then come back later in the month after your books close to
update the Accounting metrics. If you don’t like that approach, you can just wait until
your books close and then update your financial model with all of the metrics at one
time.
Updating your financial model with actual data each month will help you to keep your model
grounded in reality. We call this “grounding your model.” It ensures you have an accurate
forecast, you’re setting appropriate growth targets for your business, and you’re making
decisions based on an accurate runway projection.
When the month ends, you’ll update your financial model with as many of your actual
metrics as you can. To do this, go into your financial model, find the column for the
month that just ended, and “hardcode” or “override” the forecasted value for each
metric with the actual values from your metric-tracking system.
Before you do this each month, it’s important to save a copy of your financial model
so that you have a reference for your previous forecast. This will come in handy in the
next step of the playbook.
Most metrics, such as those for Sales & Marketing, Revenue & Billing, and Payroll, are
readily available in real-time right as the month ends. Other metrics, such as those for
Accounting, may take a bit more time as your accounting team must “close the books”
each month.
Step #4: Update Your Model with
Your Actuals
After you have updated your financial model with your actual metrics, you should sit
down with your co-founders, your executive team, or just by yourself, and review
your results for the prior month. You should compare the goals (or forecast) you set in
your financial model against the actual results you brought over from your metric-
tracking system.
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Step #5: Compare & Contrast
What goals did you hit? These are
highlights you should celebrate with
your team, and they’re great
information for you to share with
investors and stakeholders in your
regular investor updates.
What goals did you miss? Can you
identify specific reasons why you
missed each one? Are they simply
anomalies or outliers that you can
safely ignore? Or are they recurring
trends that warrant time and
resources to address and bring back
into line with your long-term goals
and projections?
Go through this process for the entire financial model, including your customer
acquisition, revenue, people, expenses, and cash runway. Running this comparative
process allows you to continually tweak your financial model to become more
accurate, and thus more predictive of the future. This allows you to make better
decisions for your business and better understand the impact of those decisions on
your bottom line.
This comparative process also acts as a forcing function, requiring you to
acknowledge problem areas and ask the tough questions every month. This ensures
that you are holding yourself and your team accountable, and giving yourself the best
chance of hitting your goals for the next month, quarter, year, and beyond.
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Last, but certainly not least, you’ll want to
review your forecast and tweak it based on
your fresh sentiments after the comparative
process you just ran in step #5.
If you missed a lot of your goals, and this has
been happening for a few months or more,
you may want to reign in your forecast.
Remember that our initial goal was to create a
forecast that is both attractive and
reasonable. If your original forecast was
perhaps more attractive than reasonable, this
is your opportunity to correct it and ensure
that you’re not over-forecasting your runway.
If you’ve been hitting your goals, or even
coming close, you may not need to make any
tweaks at all!
The purpose here is to go through your
projections for customer acquisition, revenue,
people, and expenses, and to ask yourself
whether or not your current forecast still
feels reasonable. Does it align with both your
goals and your actual performance? Does it
get you where you need to be to achieve your
desired outcomes?
If the answer to both of these questions is
“yes” for any given part of the model,
leave it as is. Nice job! If the answer is “no,”
then adjust your forecast until the
answer is “yes.”
Step #6: Tweak & Repeat
Step #1
Step #2
Step #3
Step #4
Step #5
Step #6
Set Your Forecast
Execute Your Plan
Track Your Metrics
Update Your Model
with Actuals
Compare & Contrast
Tweak & Repeat
Forecastr offers a wide range of support services to help startup founders succeed
with financial modeling.
Forecastr Launch will help you succeed with our free templates with additional
training and documentation, along with limited access to our team of financial
analysts. It's a great option for founders on a limited budget.
When you're ready to leave the spreadsheet behind, you can take your model to the
next level with Forecastr's full financial modeling software. Every subscriber gets a
30-day white-glove onboarding, along with ongoing support from a dedicated
financial analyst to help you build and maintain an investor-grade financial model.
Request a demo to learn more.
We also offer a range of services from a la carte financial analyst support all the way
up to fractional CFO services. Reach out today to get the help you need.
Getting Help with Your Financial Model
